The risk of deflation has been dominating financial news lately, but health care costs for retirees continue to increase rapidly, according to Fidelity Investments.
The company has calculated an annual retiree health care cost estimate since 2002. Over the past seven years, the amount needed for retiree health care costs has jumped $80,000, or 50 percent, to $240,000 in 2009 from $160,000 in 2002.
A 65-year-old couple retiring in 2009 will need about $240,000 to cover medical expenses in retirement even with Medicare insurance coverage, according to Fidelity Investments’ latest health care cost estimate. This figure is a 6.7 percent increase over the 2008 estimate of $225,000.
“American households, already under strain from the difficult economy, are facing another challenge to their financial security in retirement as medical costs continue to rise steadily,” says Brad Kimler, executive vice president of Fidelity’s Consulting Services business, which calculated the retiree health care cost estimate. “With employee-sponsored retiree health-care coverage on the decline nationwide, it is imperative that today’s workers begin to set aside money themselves for medical expenses in retirement as part of their overall retirement strategy.”
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As in years past, the Fidelity 2009 retiree health care cost estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program Medicare. The Fidelity estimate takes into account cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance).